Everything you need to know about Third Party Managed Accounts (TPMAs)
You have probably heard a bit about TPMAs over the past six months or so. No?Actually, that isn’t much of a surprise. We have found that very few firms have actually taken on board this new alternative to operating a client account.
But we think every firm should absolutely sit up and take notice.
Think about why solicitors get into serious trouble. Dishonesty, client money and AML – they must be the top three offences that lead to strike off.
And now we have the option under the Accounts Rules to effectively remove one of those regulatory risks (client money), and seriously reduce another (AML). We can’t do anything about dishonesty, I’m afraid.
However, the existence of TPMAs has seemingly gone under the radar for most firms. And for those who do know they are a thing, how they actually work is a bit of an unknown.
So we thought we should speak to Shieldpay, one of the TPMA pioneers. A link to the ‘Everything you need to know…’ blog is below.
And before you think this is just a promotional item for Shieldpay, it is not. We have clients using TPMAs with great success. Yes, in high volume conveyancing and commercial work. And yes, they work well in practice.
So whatever your practice area, if you currently operate a client account you should at least look at whether a TPMA could work for you. Not only will it de-risk your business, but it will also do away with annual audits and will reduce your regulatory fees.
What’s not to like?
SRA report on the state of the solicitors’ PII market
It has finally dawned on our regulator that the professional indemnity insurance market for solicitors is in a real mess. I mean, truly awful.
They may have thought that insurance brokers were exaggerating the ‘hardening’ market conditions to drum up a bit of business.
But then a couple of insurers exited the market entirely.
And a pandemic hit.
Now there is evidence of premiums increasing across the board (anecdotally around 25% in some cases). And insurers have become much more picky about the risks they are prepared to underwrite – with some firms unable to obtain cover at all.
Our recent PII update from Gary Horswell put all this into context.
The SRA has published a brief report into the market (see link below). It makes for sobering reading:
- The PII market was hardening pre-COVID, driven by increasing claim values (not just in PII), poor returns from investment of premiums, and (ahem) the ‘unattractive’ nature of the SRA Minimum Terms.
- The result is that there are fewer insurers in the market, with less capacity, and less appetite for risk.
- COVID-related claims across the insurance industry (e.g. business interruption), is exacerbating the problems by further reducing capacity.
- Insurers know that economic downturns tend to result in more claims against solicitors. This is also driving their appetite for risk and pricing.
- Financial viability is also a huge risk for insurers in the current environment. If a firm cannot pay its premium, the insurer remains on the hook for claims and run off.
If you were expecting a happy ending or word of optimism, sorry – there is nothing in the report.
Stiff drink recommended before clicking the link.
Solicitors Indemnity Fund (SIF) extended for one year
The SIF, the fund that underwrites the risk of claims made after a closed firm’s run-off cover has ended, was due to close in September.This should have been more of a scandal than it was. It leaves an entire generation of retired solicitors at personal risk.
After vigorous lobbying from The Law Society, the SRA has now confirmed that the fund will remain open until the end of September 2021. They may have realised that the midst of a global pandemic is probably not the time to remove a fundamental safety net.
The Law Society President was quoted by the Gazette as saying:
“There was a real danger that the closure of SIF at the end of September could leave former principals personally exposed to claims relating to work that their firm had done, perhaps decades in the past. Solicitors will be relieved, because with the breathing space this pause provides, the Law Society and the SRA can work together with insurers to try to find a practical solution that will protect former principals and their clients once SIF finally does close to new claims.”
Hopefully, additional insurance products will become available over the next year to protect those most at risk.
Fingers crossed, eh?
Practice notes and guidance
- Updated guidance on Transparency in price and service – Make sure your website meets the requirements of the Transparency Rules. It’s such an easy failure for the SRA to pick up on. Let us know if you need help – we can audit your website for you.
- Updated guidance on TLS’ position on the use of virtual execution and e-signatures during the coronavirus pandemic, with a new section ‘Tips on how to operate in practice’.
- New practice note on Property and registration fraud – Essential reading for conveyancers
- New practice note on Judicial mediation -Essential reading for employment lawyers
Disciplinary decisions – use these to tales of woe to educate your team on the importance of ethics and compliance
- Eilish Adams struck off for using client money to pay for jewellery
- Sufe Miah fined £20,000 for ‘sitting on’ £530,000 received from an unknown third party – effectively using the client account as a banking facility in a series of transactions which bore the hallmarks of money laundering. (The ‘we didn’t know what to do with the money’ defence didn’t wash with the SDT)
- James Andrew Wilson fined £10,000 for sending abusive Facebook messages
- Ross Ian McKay struck off after having been jailed under AML laws for being the ‘gangster’s go-to guy’ for setting up dodgy investments
- Legal cashier Rachel Taylor receives section 43 order (banning) for making almost £500,000 of client account transfers to keep a high street firm in business (and the ‘reckless’ supervising solicitor receives conditions on his practising certificate)
- Emma Nicole Reese rebuked for breach of undertaking to Lloyds and failing to supervise a rogue consultant solicitor
If you aren’t relishing the prospect of returning to the daily commute, speak to us about work-from-home fee sharing opportunities